OPINION: Local CPAs, attorney weigh in on new tax law

OPINION: Local CPAs, attorney weigh in on new tax law

Photo courtesy of Cagle Cartoons

By Raanan Geberer

Special to the Brooklyn Daily Eagle

At the end of last year, President Donald Trump signed the Tax Cuts and Job Acts Bill. The bill, which is not very popular in Brooklyn, a Democratic stronghold, is the most comprehensive piece of legislation yet signed by the Trump administration. It has been the subject of seemingly endless debate by TV commentators, bloggers, columnists and elected officials.

However, almost lost in the shuffle have been the opinions of those who will have to work with the bill every day — accountants and tax lawyers. This writer spoke to Dewey Golkin, a trustee of the Brooklyn Bar Association who is both an attorney and a CPA; and certified public accountant Barry Picker and Edward Torres, both members of the Brooklyn-Queens Chapter of the New York State Society of CPAs.

Naturally, many members of the general public are concerned by the new law and want to know how it will affect them. “I’m already getting a lot of calls,” said Golkin. Some people wanted to pre-pay their 2018 taxes (as opposed to the 2017 taxes, which will come due in April), because for 2018, said Golkin, “the state tax deduction will be limited.”

In the new tax plan, state and local deductions on income and property tax will be capped at $10,000; but for 2017, there is still no limit on the amount one can deduct for state and local income and property taxes. “If you owed money in 2017, and you pay money in 2018, then you’re subject to the 2018 regulations,” says Picker.

For practitioners, the new bill means that they will have to learn new regulations. “I’ve been doing this for 30 years, and none of us like change — we get used to doing things a certain way,” said Torres. Thankfully, today there are software packages that guide professionals. “In the old days, there were no computers,” Torres said. Indeed, this writer still remembers his father, also a CPA, receiving supplements and changes in the law by mail, which my father would then have to insert into one of his heavy, bound tax books.

In addition, how the regulations apply to some situations, such as how they will affect people who derive rental income from real estate, are still unclear and will need further clarification from the IRS, Picker says.

Those interviewed by the Eagle mentioned some positive points of the new tax plan. The plan, says Golkin, nearly doubles the standard deduction to $24,000 for married couples who file jointly and $12,000 for singles. Therefore, a lower-income married couple without children could theoretically do better under the new plan.

However, if that same couple has children, then the new law may be a problem, since starting in the 2018 tax year, the new law repeals personal exemptions which are valued at $4,050 per taxpayer, spouse and dependent for 2017.

One part of the new law that is expected to impact many Brooklynites is the fact that state and local taxes will no longer be deductible for your federal income tax return. “This will likely effect real estate taxes,” says Torres. “In any high-tax state (such a New York), it will likely lower the amount of money someone can borrow to pay for their home.”

The non-deductibility of state and local taxes will even hit lottery winners, Torres says, “If you win $500,000, you still have to pay state and local taxes, and you won’t be able to deduct that from your federal taxes anymore.”

Another complicated facet of the new law, says Picker, is the new 20 percent deduction for small businesses, which include S corporations and limited-liability companies. To qualify for the full deduction, businesses’ taxable income must be below $157,500 if the owner is single or $315,000 if the owners are a married couple and file jointly.

But when taxable income exceeds these amounts, some entrepreneurs with service businesses, including doctors and lawyers, may not be able to take advantage of this deduction if their income is too high. Also, complications may ensue in the case of two partners when one is eligible for the 20 percent deduction and the other isn’t.

Among other facets of the law, Torres said, is that taxes on long-term capital gains and qualified dividends remain unchanged, with a maximum rate for taxpayers in the lower tax brackets and 20 percent for those in the higher tax bracket. “This is a good thing,” he said.

Another is the change in the estate tax — the tax bill temporarily doubles the exemption amount for estate, gift and generation-skipping taxes from a $5-million base to a $11-million base. “This could have a possible impact on estate planning,” Torres said.

All in all, said Picker, the new law will be costly to middle-class wage earners. “If you live in Brooklyn,” he said, “you’ll be screwed.”